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IN TODAY’S EDITION
1️⃣ Is the Nippon Steel deal over? |
2️⃣ Eswatini snubs China |
3️⃣ Outfit of the day |
Hi Intriguer. When we did brief stints negotiating international free-trade agreements, we learned that the trickiest chapters to close were often to do with ‘national champion’ industries.
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Agriculture, famously, was the thorn in many negotiators’ backsides because it evoked sentimentality around agrarian nationalism and self-sufficiency, and often triggered domestic protests from farmers.
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Another industry that stirred up similar sentiments was steel manufacturing. For the US, in particular, steel is embedded into cultural moments such as the battle of King Kong, Superman’s feats, and even the Hollywood sign.
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We’ll dive into this in our top story today, which looks at why the US might reject Nippon Steel’s takeover bid for US Steel.
THE HEADLINES
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Macron appoints former Brexit negotiator as prime minister.
Michel Barnier, a centre-right former minister and European commissioner, now faces an uphill battle to form a government capable of surviving a deeply divided parliament. France’s left-leaning coalition is already unhappy – it won the most votes earlier this year, but President Macron passed over its candidate in favour of Barnier.
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Japanese 7-11 owner rejects takeover bid.
Japan’s Seven & i Holdings has turned down last month’s $38.5B offer by Canadian convenience store giant Couche-Tard, saying the price was too low, and the regulatory hurdles too high. There’s still room for Couche-Tard to improve its offer, but it’s unclear if that’ll happen.
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China halts foreign adoptions.
For unspecified reasons, the foreign ministry has announced China is suspending all foreign adoptions of Chinese children, with the exception of blood relatives. The US is the top destination, but the practice has drawn scrutiny in recent times – earlier this year, both Norway and Denmark warned that international adoptions are vulnerable to fabricated documents.
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‘Brat’ summer was the hottest on record.
This year’s northern summer hit an average temperature of 16.8 °C (62.24 °F), slightly above last year’s record. Researchers are now expecting 2024 to become the hottest year on record.
Hunter Biden enters guilty plea in tax case.
The US president’s son has pleaded guilty to nine federal tax charges, avoiding a trial that would’ve captured national attention once again. The charges included that he failed to pay $1.4M in taxes.
TOP STORY
Why is the US blocking a Japan steel deal?
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When US Steel accepted a buyout offer from Japan’s Nippon Steel last year – dodging a lower offer from domestic rival Cleveland-Cliffs – Wall Street rejoiced.
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Washington, on the other hand? It grimaced.
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And so, nine months of K Street lobbying, labour union wrangling, and (yes) voter polling later, news has emerged this week that the White House now plans to block the deal on national security grounds.
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But first, some backstory…
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Founded in 1901, US Steel is as American as, well, US Steel. It supplied metal for the Empire State Building, pioneered workplace safety rules like hard hats, and even got name-dropped in The Godfather II!
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It was the world’s largest company for a time, but these days it isn’t even the largest steel company. In fact, it’s the world’s 24th largest steel company, at the tail end of a list that’s long since been dominated by China’s industry.
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Washington has tried to stem the bleeding over recent years by —
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Imposing a 25% tariff on most steel imports (Trump)
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Renegotiating certain steel quota arrangements (Biden), and
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Giving local steelmakers a boost via industrial policy (Biden).
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And sure, the sector has welcomed the help, but CEO David B Burritt says a takeover from Nippon Steel (the world’s 4th largest producer) would do something bigger: turn the firm back into a “truly global steel company”.
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Not so fast.
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Biden, Harris, and Trump all want US Steel to remain US-owned, and there’s been a bipartisan push for the powerful (if mysterious) Committee on Foreign Investment (CFIUS) to investigate the deal on national security grounds.
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CFIUS has been around for half a century, but US presidents have only blocked eight deals on CFIUS grounds. Seven of the eight have involved deals originating from China. And the most recent one (from May) involved a China-owned crypto-miner buying land right next to a US nuclear base in Wyoming!
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But here we are now talking about a steel deal, with a major US ally (Japan), and America’s top foreign investor, which already owns another Pennsylvania steelmaker (Standard). So then… why not let it own another?
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There are a couple of factors at play here. First, sure, steel often pops up in national security discussions because of (for example) its core military, energy, and infrastructure uses.
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But second, the United Steelworkers union has long opposed the deal, worried about “good jobs, benefits and retirement plans.”
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And United isn’t any old union: it’s the largest industry union in North America (1.2 million members). And it’s headquartered in Pennsylvania, which isn’t any old state – it’s a key swing state along any candidate’s path to the White House.
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So how’s everyone reacting to a possible blocking?
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CFIUS still isn’t commenting, and apparently hasn’t even made a recommendation to the White House yet
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Some US Steel workers have just held a rally in support of the sale, and the company’s CEO is warning of more plant closures if the sale fails, and
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The markets seem to agree – US Steel shares have plunged 20% this week, and 40% since opposition to the deal first emerged.
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As for Japan? It’s stayed silent in public, though a contender to be Japan’s next prime minister this month (cabinet minister Taro Kono) just said the quiet bit out loud: “everyone wants the votes of labour unions in the presidential election, but I hope that the market will not be distorted by such things”.
INTRIGUE’S TAKE
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Sure, Japan has stayed silent in public, but it’s been busy behind the scenes. We’ve been hearing it for months, and it’s now there for all to see: soon after opposition to this deal first emerged, Nippon Steel hired one of DC’s top lobbying firms, US Steel hired another, and the Embassy of Japan added a few more to its own roster. And to be clear, lots of countries do this. The top spenders are the Saudis, but even tiny Palau gets amongst it.
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Still, it’s interesting that all the lobbyists in Washington – plus some of the arguments we’ve outlined above – don’t seem to be enough to outweigh a few thousand crucial votes in Pennsylvania during an election year.
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And that raises some more intriguing questions:
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Are we seeing a change in the role of CFIUS?
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Are we seeing a change in US openness to foreign investment?
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All we’d say is that, first, what we’re seeing is an election year. Second, this political process is coinciding with a geopolitical one. And third, any big business not watching both processes very closely might be in for a shock.
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Also worth noting:
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Nippon Steel has argued the deal will “enhance American national security” and has pledged to keep US Steel headquartered in Pennsylvania.
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The US department of justice reportedly also opened an antitrust investigation into the Nippon-US Steel deal in April.
MEANWHILE, ELSEWHERE…
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🇵🇰 Pakistan: Iran has slapped Pakistan with a ‘final notice’ to uphold its end of the deal and finish construction of a cross-boundary 1,900km (1,180mi) long gas pipeline. Pakistan is unlikely to be swayed and has pointed to US sanctions on Iran as an insurmountable hurdle to completing the project.
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🇩🇪 Germany: Police have shot a suspect carrying an old hunting rifle in Munich close to the Israeli consulate, which was closed for a 1972 Munich Olympics attack memorial. Local media outlets say the suspect, an 18-year-old Austrian national, had connections to radical Islamist groups.
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🇳🇿 New Zealand: 27-year-old Nga Wai Hono i te Po has been anointed as the new Maori queen following the passing of her father last week. The role has no formal judicial or legal authority in New Zealand but it’s influential, particularly among the local Maori population.
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🇳🇮 Nicaragua: The US has announced it has secured the release of another 135 Nicaraguan political prisoners on humanitarian grounds. The prisoners are now likely to be sent to Guatemala while they apply for entry to the US and elsewhere.
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🇸🇿 Eswatini: Eswatini is the only African nation not attending this year’s Forum of China-Africa Cooperation in Beijing, and its absence has been noted! China’s foreign ministry has urged Taiwan’s only diplomatic partner in Africa to recognise the trends and “make correct decisions”.
EXTRA INTRIGUE
Some weekend recommendations from Team Intrigue:
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Read: Colombian drug kingpin Pablo Escobar left behind a sprawling estate and several hippos. Check out how Colombian authorities are now struggling to confront the growing hippo population.
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Listen: Catch up on the Democratic Party’s China strategy in our latest episode of Election Intrigue.
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Watch: Oil can be a blessing… but it can also be a curse, and as Nigeria knows, it’s a difficult one to dispel.
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✨ Bonus recommendation: If you’re in Sydney, Australia, join our co-founder Helen Zhang for a conversation with the United States Studies Centre on the future of US tech policy. It’s Thursday 10 September. Register here!
OUTFIT OF THE DAY
Credits: @viktoriaserdult via Twitter/X.
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Diplomacy is found in the smallest of things: the firmness of a handshake, the appropriate silverware for a state dinner, the wrinkle-free red carpet.
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So we were a little confused by Hungarian Foreign Minister Péter Szijjártó’s choice of outfit upon arrival in Bahrain: jorts. Did his luggage get lost? Did he lose a bet with his fantasy football group? Is he playing 4-D geopolitical chess? Has anyone ever declared war while wearing jorts? Was it an option of last re-jort?
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P.S. Yes, he later changed into a suit for the official press conference.
FRIDAY QUIZ
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Yesterday (Thursday) the world celebrated International Day of Charity!
Which of the following countries ranks as the most generous, according to the World Giving Index? |
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Which of the following UN organisations was founded first? |
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How much money did the hit charity single ‘We Are the World’ raise after its release in 1985? |
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